Which industries benefit most from outsourcing?

IT Outsourcing Trends 2020: New Outsourcing Target Countries for Small Businesses


The sustained growth in digitized industries is leading to a local IT skills shortage, so that more and more companies are trying out alternative approaches to the procurement of developer talent - outsourcing.

In 2018, the global IT outsourcing market had a turnover of 85.6 billion US dollars: a clear sign of a positive trend in the industry in the coming years. Around 52 percent of smaller companies are now considering working with remote developers in 2020.


Read our analysis of global IT outsourcing trends in 2020, in which we cover the following topics:

Your guide to nearshore software development in Eastern Europe

The software development market in 8 of the top target countries in Eastern Europe - Poland, Ukraine, Romania, the Czech Republic, Hungary, Bulgaria, Belarus and Croatia.

New target countries for software development

American and Western European medium-sized companies are outsourcing due to the lack of talent, high development costs and the constantly growing competition for the best skilled workers.

For large companies, India and China remain the most popular destinations for outsourcing their IT and business processes. In the meantime, small and medium-sized companies are increasingly looking for technical talent in the emerging IT outsourcing market in Eastern Europe.

The transition of providers from a purely cost-oriented approach to a price-performance ratio makes it easier for Western European companies to decide to open their doors to talent from the Eastern European market.

Poland, the Czech Republic and Ukraine are fast growing target countries for outsourcing with moderate software development costs of $ 25 to $ 50 and at the same time places with many skilled workers with highly developed technical know-how. See our overview of software development costs to help you choose the right IT outsourcing country for you.

Technology outsourcing trends for 2020

AI, IoT and process automation with robots will change customer experiences in the future.

Statista predicts that by 2021, more than 2.14 billion people worldwide will buy services and goods online. This explains why online companies will gear their transformations towards making online shopping more convenient.

In 2020, in addition to human salespeople, we will see an increased use of chatbots to help with shopping. In the meantime, process automation with robots will reduce bottlenecks in internal business operations.

AI and deep learning

AI-powered networks are used to improve the quality of customer service. Ideally, the AI ​​supports the e-commerce platforms by analyzing the behavior and purchasing habits of customers. In this way, online shops can offer a more personalized customer experience, in which past interactions flow into further interactions of the customers with the platforms.

AI powered chatbots

Around 70 percent of millennials surveyed are satisfied with their interactions with chatbots. According to Gartner's research, about 85 percent of customers will buy goods or services in the future without having contact with a person. Chatbots can replace human salespeople in providing online advice.

Robot-controlled process automation

More and more companies are planning to lower their operating costs by implementing RPA. In 2020 we will see more automation solutions for logistics management, payment processing and ERP management. Most digital marketing departments use PRA to save on content personalization.

Cybersecurity and GDPR Compliance

Cybercrime has increased in scope, damage and complexity. Social media plays an important role in distributing the world's $ 3.25 billion in revenue.

Professionals estimate the value of personal data stolen from social media users at $ 630 million annually. Tech companies are slowly protecting themselves against cybercrime with insurance policies. The cyber insurance market is estimated at $ 20 billion by 2022.

Although cybercrime causes great harm to the economy, cyber attacks are more often targeted against governments. As a result, governments are among the top cybersecurity investors.

One year after the GDPR, only a third of the technology companies have redesigned their business models to conform to the GDPR. In the UK, the move to privacy is expected to cost $ 1.1 billion, while American companies will spend $ 7.8 billion.

Complying with the GDPR costs less than violating data protection guidelines. In the worst case scenario, a company would have to pay up to 4 percent of its worldwide annual turnover in the event of a breach.

Growth in data storage and migration in the cloud

The current value of cloud computing has reached $ 180 billion. The PaaS, SaaS and IaaS market is growing by 24 percent annually. By 2020, the global cloud computing market will be valued at $ 411 billion.

In 2020, technology giants like Microsoft, IBM, Intel and Google will invest even more in building a quantum computer. By 2027, the quantum computer market will be valued at $ 8 billion. This explains why more and more companies like Alibaba and Samsung will test their quantum computer-generated theories in real life.

Disruption through the 5G network

The speed of data exchange and the number of devices connected to the 5G network are the reasons why 5G will generate revenue of $ 47.4 billion by 2027.

Global society will benefit from faster and more efficient data exchange, as companies can equip smart cities with comprehensive networking.

5G will massively change the global information infrastructure. The introduction of the fifth generation of networks will trigger changes in the automotive, AR / VR, mobile connectivity, telecommunications and all other digitized industries.

Why do German companies develop their software in Ukraine?

Find out about the state of the Ukrainian IT market and why Ukraine is an attractive location for IT outsourcing.

Digitized industries where outsourcing will become important in 2020

Much of the outsourced jobs are created by the digitization of traditional industries such as healthcare, education, finance, banking, etc. Technology trends have a huge impact on each of these industries. Here is a selection of industries where app development outsourcing will definitely play a major role in 2020:

Fintech: digital financial services

In 2022, the global fintech market is expected to reach a value of 309.98 billion US dollars. Customer orientation and data security are the two areas that fintech companies will deal with in the following year. Digital banking, blockchain and AI-based solutions enable more users to conduct secure financial operations without sacrificing convenience.

Which technologies will fintech change in 2020?


According to Business Insider, be Digital banks especially loved and used by the most digitally active generation - the millennials. They are most likely to make P2P transfers and global payments, use contactless bank cards, and manage cryptocurrencies through digital channels.

Artificial intelligence has limitless uses in financial technology. Global banks are investing in AI to optimize internal banking operations, ensure the secure processing of large transactions, and reduce cyber fraud.

Blockchain is a relatively new word in fintech that allows the "middlemen" to be excluded from transactions in stocks, the unified digital identity can be maintained and used, and smart contracts can be signed. According to Accenture, blockchain will help investment banks cut 30 percent of their infrastructure costs, valued at $ 8-10 billion.

Healthcare and medical technician.According to Deloitte, the value of the global medical technology market will reach a little over $ 10 trillion by 2022. Medical institutions and health care startups are working to reduce costs, improve access to medicine and medical services, and improve hospital diagnostics and management.

Which technologies will change healthcare in 2020?

According to Transparent Market Research, the telemedicine market is expected to generate $ 19.5 billion in profit by 2025. Secure online video calls are already replacing hospital visits to the doctor. In 2020, more hospitals will offer medical services to people with reduced mobility and to people in remote areas via online services.

The value of the 3D printing is projected to reach $ 3.5 billion by 2025. Universities and hospitals use anatomically precise organ models in the training and planning of medical operations. Customized devices, tools and prostheses are made more accessible thanks to 3D printing.

By artificial intelligence assisted virtual reality opens up new horizons in diagnostics, the treatment of Alzheimer's disease and the simulation of medical procedures. Reports and data predict virtual reality will generate $ 6.91 billion in sales in healthcare by 2026.

Wearables are new forerunners in diagnostics and are projected to raise $ 27.49 billion by 2026. Versatile wristbands and heart straps, trackers, wearable patches, devices for monitoring posture, smart glasses, as well as earplugs and hearing aids have become an essential part of conventional medical technology and everyday life for ordinary people.

IT outsourcing trends in telecommunications

With the introduction of 5G networks in 2020, a new era begins in the processing of large amounts of data (big data), AI-based customer service and device connectivity. A report published by Statista on the global 5G market predicts a rapid increase in its value from USD 0.7 billion in 2019 to USD 23.95 billion in 2025.

Which technologies will transform telecommunications in 2020?

The 5G network is the most anticipated innovation in the technology world. It will bring us massive connected IoT networks, higher definition videos, and more detailed virtual and augmented realities, not to mention fully autonomous vehicles.

IoT and smart cities will network around 30 billion devices with each other in 2020. Most IoT systems are initially used in the industrial sector. 5G networks will play a crucial role in the growth of smart cities that enable communication between massive IoT systems.

Artificial intelligence will have a major impact on customer service and the detection and optimization of network anomalies in telecommunications. Finance Digest predicts that around 95 percent of customer interactions will be automated by 2025.

Your guide to nearshore software development in Eastern Europe

The software development market in 8 of the top target countries in Eastern Europe - Poland, Ukraine, Romania, the Czech Republic, Hungary, Bulgaria, Belarus and Croatia.

Small businesses will outsource more in 2020

More than 37 percent of SMEs are already outsourcing at least part of their business processes.

According to Clutch.co, around 52 percent of small business executives will continue to fill jobs with external employees in 2020. In addition, SMEs will increase their software development budgets from 6.0 to 9.1 percent in 2020.

Agility and size are two important characteristics that make a good combination of small business and IT outsourcing. Small businesses adopt new approaches, services and technologies extremely quickly.

For example, in 2016 smaller companies started using SaaS two years before larger companies. For small companies, it is easier to outsource high workloads or non-important processes to foreign service providers than to expand their internal teams.

Large companies are gradually losing interest in outsourcing development contracts. In 2020, more companies will invest in cloud computing and SaaS outsourcing, although these are still relatively new. The SaaS market will be valued at $ 116 billion and large companies will be a significant contributor to its growth.

Do you remember the global outsourcing decline in 2018? At that time, several large companies decided to cut their development budgets. Companies began migrating to cost-effective cloud environments and initiated a decline in the demand for IT outsourcing.

New challenges: Why companies outsource software development

Spoiler: It is not cost efficiency but a need for highly qualified developers that is behind outsourcing decisions.

Looking for quality

In 2016, around 59 percent of companies said they decided to outsource because they wanted to reduce spending on development. Three years later, only 35 percent are outsourcing to save on product development. A decrease of 24 percent shows a shift from cost-oriented to quality-oriented outsourcing. Approximately 18 percent of companies outsource jobs in order to gain access to highly skilled workers that they simply cannot reach in their local markets.

Focus on key competencies

IT managers are already more comfortable outsourcing low-level business processes in 2019 than they were in 2018. Around 34 percent of smaller companies are already outsourcing at least part of their business processes in order to increase sales with their core competencies.

Fewer companies build their workforce with development departments. Instead, 37 percent of small businesses outsource product development and support.

Optimizing business operations

Around 24 percent of executives outsource software development to improve internal business operations. The main motivation is to increase efficiency and speed by reducing the number of manual tasks, unnecessary operations and bottlenecks.

Software for the automation of business processes is becoming increasingly important in the B2C area. Optimized processes support companies in increasing their sales through improved customer service.

Risk sharing and engagement

2020 will change the way companies share responsibilities and risks with their partner companies and service providers. Revenue-based contracts and greater involvement of both parties are gaining in importance.

Three most commonly outsourced IT functions in 2020

Application development and management, data center operations, and database management remain the most commonly outsourced functions, according to a report by Computer Economics. Web operations and IT security are seen as promising candidates to join the others in 2020.

App development and management

The growing popularity of SaaS is leading to a steady decline in application management. In 2019, around 33 percent of companies outsourced app management, compared with 36 percent in 2018. In the meantime, budgets for outsourced app development are increasing, with 56 percent of companies outsourcing this function in whole or in part.

IT security outsourcing

The introduction of the GDPR in 2018 ushered in a new era of cybersecurity and prompted all tech companies to rethink data protection. Almost 48 percent of those surveyed stated to Computer Economics that they will increasingly use IT security services in 2020. Although the number of providers for IT security outsourcing declined, the quality of the services offered increased.

Network operations outsourcing

More and more companies are outsourcing their network operations. Instead of performing all network operations internally, around 34 percent of companies work with service providers. Due to the high cost of maintaining the network infrastructure, this trend is expected to increase.

How will Brexit affect outsourcing?

After 52 percent of the UK population voted in favor of leaving the EU, every industry in the UK began assessing the financial losses that could result from leaving the EU. As the UK ranks second in the world for outsourcing, Brexit has a major impact on companies that rely on IT outsourcing.

Lack of IT specialists

Brexit will limit the flow of talent to the UK and increase offshore outsourcing to Eastern European countries.There is no single formula for how companies based in the UK should deal with the IT skills shortage. Some companies are likely to set up more development departments outside of the UK. Alternatively, they could develop friendlier policies in-house to attract specialists to the UK.

Private sector recession and investment

The Guardian warns of an unexpected recession. All sectors - services, manufacturing and construction - show a negative growth rate. During this difficult time, UK and overseas investors are reducing funding for technology startups. In addition, the British pound is losing value compared to the US dollar.

possibilities

Brexit won't happen overnight and outsourcing providers also have an idea of ​​how to make the most of it. Knowing that outsourcing software development requires more effort, UK technology companies are already investing in technology solutions that optimize and automate their business processes.

Forecasts for the tech industry in 2020

Companies will certainly continue to outsource jobs in 2020 in order to reduce their operating costs, focus on core competencies and hire highly qualified foreign experts. Risk sharing and increased commitment on the part of service providers are new aspects of outsourcing that we will see in 2020.

In the following year the IT outsourcing market in Eastern Europe will continue to grow. Robot-controlled process automation and AI-supported customer service will be important topics in the tech industry in the coming period. Use of AI and AR / VR technologies will drive changes in fintech, telecommunications and healthcare.